Real Estate Dip Brings Layoffs in Home Construction

Only a year ago, construction firms were scrambling to find enough workers. Now they're laying them off as the real estate market slumps. Toll Brothers, one of the largest homebuilding firms, expects to lay off as much as 15 percent of its workforce.

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MICHELE NORRIS, host:

The number of new homes being built in the U.S. is down 25 percent from a year ago. That's according to new numbers out today from the Commerce Department.

There was a bump up in housing starts in November, but the overall trend is down. And with the pullback in homebuilding, layoffs have started in the construction business. Forecasters are predicting that hundreds of thousands of jobs are likely to be lost.

NPR's Chris Arnold reports.

CHRIS ARNOLD: Peter Phillips(ph) is walking up the driveway of a new home in a small subdivision he's been building in Leominster, Massachusetts. But these days, you hear more birdcalls than you do power tools.

Mr. PETER PHILLIPS: The crows are hungry.

ARNOLD: Phillips says things have slowed down a lot. He has put up eight homes here. About a year ago, he sold six of them before they were even built.

Mr. PHILLIPS: But then, you know, the summer and the spring of 2006 was a different story. It really got kind of scary.

ARNOLD: Phillips says he's had to let go of two of his three most senior workers. A project manager and a carpenter, they were contractors working full time for him.

Mr. PHILLIPS: I had to tell them, you got to go find other work. I just - I can't support it anymore. Has it shut me down? No. I'm still selling. I'm still moving. I'm not making as much profit as I had hoped. I'm not hiring anybody.

ARNOLD: Around the country, it's much the same story. Small builders like Phillips and much bigger ones are letting workers go.

Mr. ROBERT TOLL (Toll Brothers, Inc.): I hadn't made the number public, but there has been a bunch of layoffs.

ARNOLD: Robert Toll is the Chairman and CEO of Toll Brothers, Inc., one of the nation's largest homebuilding companies. He says there will be more layoffs to come. That's because it takes a long time to build a house, so there's a delay between the start of the market slump, and the actual layoffs happening.

But over the next six months or so, here's what he expects as far as total layoffs.

Mr. TOLL: I'd say the ballpark figures are something like 10 to 15 percent for inside the company, and you'll probably see a drop of 10 to 15, maybe 20 percent in the construction workers.

ARNOLD: That's a lot of workers, since Toll Brothers employs 5,500 people directly, and more than 10,000 contract construction and trades workers. Likewise, a major building materials company, Stock Building Supply, recently laid off about 2,000 workers - 10 percent of its workforce. Many other firms are also cutting jobs.

Homebuilder Robert Toll.

Mr. TOLL: But it could be very temporary if the sales pick up again.

ARNOLD: Toll hesitates to make any predictions, though he said he's seen signs of activity that might mean some markets are starting to pick up. With new and existing home inventories still very high, most economists don't predict the recovery in the broader housing market until at least the middle of 2007. Some say much, later. Chip Case is a housing economist at Wellesley College.

Mr. CHIP CASE (Wellesley College): The homebuilding sector is about $800 billion a year, which is about $1 in $20 in the whole economy - about 5 percent, 6 percent of the whole economy. And that number is likely to go down substantially in the next year. That's a lot of expenditure, and if you add up all the jobs that depend on it, it's a big hit for the economy to weather.

ARNOLD: Case says it's likely that hundreds of thousand of people will lose their jobs - house framers, real estate agents, people who make or sell building materials and so on.

Back in Leominster, Massachusetts, outside Boston, Peter Phillips is trying to figure out what all this means for his small homebuilding business.

Mr. PHILLIPS: When the economists talk about it, they talk about it nationally. Locally, is where I'm interested? It's hard to decipher, you know, that information down to this level.

ARNOLD: One recent report out from Moody'sEconomy.com predicted quite different recovery patterns in different metro areas around the country. The report finds that some cities, like Las Vegas; Bakersfield, California and Portland, Oregon might not recover until 2009. But other cities, including Boston, Minneapolis and Boulder, Colorado might have already hit their bottoms.

Chris Arnold, NPR News, Boston.

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